Emergency Budget was not an “economic necessity”

The National Institute of Economic Research (NIESR) has hit out at the Coalition Government’s Emergency Budget, claiming that: “The emergency was one more of political theatre than economic necessity”.

The comments came from Ray Barrel, senior researcher for the NIESR, as he spoke at the launch of the NIESR quarterly company review. He insists that the austerity measures put in place are heavy handed, and that the tax rises and spending cuts did not have to be introduced straight away. Barrel added: “It is not clear that spending-led consolidations have recently been better than tax-led ones. Hence, we must see the choice of a spending -led consolidation as a political one based on a belief in the small state.”

However the UK Treasury stands by the Budget: “The UK is forecast to have the highest borrowing in the G7 this year and is borrowing one pound for every four it spends. The Budget set out a plan to accelerate the reduction of the deficit and restore confidence in the economy, and was welcomed by the OECD”.

The NIESR report has forecast a drop in growth in 2011, down to 1.7 percent from 2 percent citing the austerity measures as a reason. They also claimed that inflation will stay above the target of 2 percent, even into 2012, due to VAT rising from 20 percent from 17.5 percent.